The Australian dollar initially tried to rally during the trading session on Tuesday, but then rolled over to reach towards the 0.75 level underneath. That’s an area that features a gap on the chart as I have marked, and I think that the area is likely to attract a lot of interest, and I believe that the market should be supported. However, if we were to break down below here I think there is even more support at the 0.7750 level. The Australian dollar is obviously driven by the gold markets as per usual, so if gold markets start to rally, that should drive the Australian dollar higher. Beyond that, it also reflects what people think about the US dollar, as gold and the Aussie both will move counter cyclically to greenback bias.
I believe that eventually were going to go looking towards the 0.80 level above, which of course was an area that has been attractive for traders more than once over the last several decades. If we were to break above that level, becomes a “buy-and-hold” market, but until then I think we will see a lot of volatility. By adding to your position slowly, you can build for a massive move later. I think that the 0.75 level underneath offering support has been very important in the past, and of course the recent bounce. It’s not until we break down below there that I would be concerned about the Aussie dollar, and a breakdown below there would be very negative longer term. Until then, I like buying dips in small bits and pieces, but I also recognize is going to take a significant amount of momentum to continue above the 0.80 level.
Written by FX Empire